Written by André B. Cotten, Regulatory Compliance Counsel
Hello, compliance friends! As a millennial, before trying a new restaurant, traveling somewhere new or even a joining a new credit union, I like to at least do some research. Normally, I try to read reviews from various sources to ascertain a broad sense of the market's feedback. As people continue to grow more reliant on the opinions of others, I want to explore what this may mean for credit union complaints and how credit unions can potentially mitigate this risk.
From a reputational risk perspective, a member complaint going viral presents a huge threat to credit unions. To mitigate this risk, a well-designed and properly implemented complaint management program is a tool that can uncover noncompliant business practices. Strong complaint management programs also can improve member service by providing members with an easy-to-use method of resolving issues.
Note: as a credit union considers their complaint management system, the credit union may also want to review and define what constitutes a "complaint" so that staff understands when escalation to the complaint resolution process is necessary. The credit union may also want to institute appropriate training on these policies for any staff members that resolve complaints or may have the opportunity to receive a complaint from a member. It is also important for policies and procedures to include how and when responses should be made, including any regulatory time limitation, i.e. Regulation E's error resolution process.
More importantly, regulators are increasingly focusing on member complaints as a source of future regulation and as an examination trigger. A comprehensive complaint management process allows a credit union to prevent and reduce regulatory violations through self-identification and correction. Alternatively, complaint data can validate a credit union's controls in some areas and indicate risks and the need for training in others.
NCUA Complaint Process
In June 2015, NCUA issued Letter to Credit Unions 15-CU-04 advising that the agency had changed its complaint-handling process to allow credit unions 60 days to resolve most consumer complaints before the NCUA Consumer Assistance Center intervenes. The consumer complaint process has two distinct phases: 1) attempted resolution by the credit union and 2) investigation by the Consumer Assistance Center.
During the first phase, NCUA forwards the complaint to the chairman of the appropriate credit union committee, and the credit union then has the opportunity to review the complaint and has 60 days to attempt its resolution. During the complaint resolution process, the credit union is encouraged to communicate directly with the member. NCUA also recommends the credit union respond in writing to the member, with a copy of the letter going to the Consumer Assistance Center, referencing the case number and whether it was able to resolve the complaint.
The second phase involving a formal investigation will begin if the Consumer Assistance Center does not receive a written response from the credit union within the 60-day time frame or if a response is received advising no resolution was possible. Conversely, if the Consumer Assistance Center is notified in writing within the 60-day period that the matter has been resolved, it will close the case. However, the member retains the right to dispute the resolution of the complaint in writing, within 30 calendar days of the credit union's response letter. A member dispute may also trigger a formal investigation.
Elements of a Comprehensive Complaint Management Program
A comprehensive complaint management program consists of the following: policies and procedures; clear channels of communication; an investigation process; written response; maintaining records; corrective action; and retaining, organizing and analyzing complaint data.
A credit union's written policies and procedures regarding the handling of complaints is critical in creating fair, consistent and timely resolution of complaints. A credit union may also want to establish policies and procedures for both complaints received from a member directly, as well as a complaint received from a regulatory body.
The Office of Consumer Financial Protection and Access's guidance recommends establishing channels to receive member complaints and inquiries such as telephone numbers or email addresses dedicated to receiving this type of correspondence.
After a credit union receives a complaint, the method of investigation depends on the nature of the complaint. However, an investigation may include: interviewing the member; reviewing the member's account information and history; interviewing appropriate credit union officials and staff; reviewing pertinent written and unwritten policies and procedures; reviewing multiple loans to determine the actual practices of the credit union; and reviewing relevant laws and regulation.
Once the investigation is complete, both the supervisory committee guide and the OCFPA recommend that responses to complaints be provided to the member in writing. A written response allows the credit union to explain the resolution of the complaint to the member in a precise and clear manner, as well as creating a record of the date and manner in which the complaint was resolved.
If the investigation of a complaint leads to the discovery of illegal, improper, unfair or discriminatory practices at the credit union, it is critical that the discovery leads to change in that practice. The credit union may also consider developing procedures to address or correct illegal or improper practices. For example, a credit union's recommendation for corrections could include a change to policies and procedures, additional compliance training and monitoring, and updating tools, systems and written materials.
Lastly, collecting and logging complaint data has the potential to reveal a wealth of information. The credit union may want to consider refining its data indicators to better categorize, organize, and analyze complaint data. Theoretically, analyzing complaint data provides a credit union with the opportunity to address trends, isolate areas of risk, identify weakness in controls and self-identify compliance violations.
A comprehensive complaint management system can lead to cost efficiencies by preventing member loss, allowing for self-identification and correction of regulatory violations, and preventing litigation by preemptively fully resolving member complaints.
Please see the Office of Financial Protection and Access for additional complaint management guidance: https://www.ncua.gov/About/leadership/Pages/consumer-protection.aspx
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